The long-term picture for social media giant Snap remains unclear after the company posted a huge quarterly loss of $2.2bn on May 10.
It was the first earnings report from Snap Inc – the parent company of Snapchat –after its much vaunted initial public offering (IPO) in March, which valued the company at approximately $20bn.
The vast majority of that loss comes from Snap’s employees cashing in their stock options, accounting for roughly $2bn of the total.
Company chief executive and co-founder Evan Spiegel took nearly half of that, receiving a special ‘CEO award’ of 37.4 million shares worth $974m, according to a filing with the US Securities and Exchange Commission.
However, Snap’s revenue growth of $149.6m was down roughly $10m on analysts’ forecasts, and the company reported an EBITDA loss of $188m.
The question investors are now asking is whether the bubble has burst for Snap, as rival Facebook tries to muscle in on the act through Instagram, which it bought in 2012.
According to reports in the Wall Street Journal, Facebook also tried to buy Snapchat in 2013, but Spiegel turned down an offer claimed to be in the region of $3m.
Instagram ups the stakes
Instagram now offers many almost identical features to Snapchat, such as ‘Stories’, which lets users create 10-second videos and slideshows that vanish after 24 hours. Instagram now has more than 600 million users, while Snapchat, in comparison, has 150 million users.
However a recent study by Business Insider revealed that while the total number of views on Instagram is often higher than Snapchat, the retention rate – the length of time users watched content – was higher on Snapchat.
Only time will tell whether Snapchat’s IPO was overvalued and if it can retain user loyalty in the face of Instagram’s assault.